Childcare Centres Sell on Record Low Yields

Competitive investors pushed the yield on two large childcare centres to record lows at the Burgess Rawson commercial property auction in Sydney on Thursday.

At the end of a bidding frenzy, an Affinity Childcare centre at Umina on the NSW central coast sold for $7.5 million on yield of just 2.99 per cent.

It followed the $8 million sale on a 3.3 per cent yield of Handprints Childcare at Turramurra in the heart of Sydney’s upper north shore.

Both properties easily beat the previous lowest yield achieved on a childcare centre in NSW, which was 3.53 per cent.

Combined, they beat the set reserves by more than $4 million.

“It’s the best-ever result at one of our auctions,” said Michael Vanstone, Burgess Rawson’s associate director for childcare.

Mr Vanstone said there were more than 200 unique queries across the two properties.

“And we had an astounding conversion to contract holders as well,” he said.

The Umina and Turramurra childcare centres were bought by individuals attracted by strong long-term leases to quality tenants and annual rental increases.

“The market is the best it’s ever been, and I think there’s a little bit more left,” Mr Vanstone said.

Two other childcare centres also sold on yields of less than 5 per cent, while a service station at Salamander Bay, north of Newcastle, attracted enormous interest with the yield bid down to 3.49 per cent on a final price of $3.15 million.

In another notable result, well-known developer Doma, which recently sold two assets to Charter Hall for $245 million, offloaded its Canberra headquarters for $2.81 million – yield of 5.32 per cent – on a sale and leaseback arrangement to a family investor.

The Sydney auction – at which 12 of 15 properties were sold on a blended yield of 4.53 per cent – was the final of three commercial auctions held by Burgess Rawson this week.

In all, 56 properties sold for $189 million with an average 11 buyers bidding on each asset which sold on a blended yield of 4.7 per cent.